The Multinational Monitor

September 1988 - VOLUME 9 - NUMBER 9


An Interview with Bennett Harrison

Bennett Harrison is a professor of political economy and planning at the Massachusetts Institute of Technology. He holds a Ph.D. in economics from the University of Pennsylvania. Dr. Harrison is co-author, with Barry Bluestone, of The Great U- Turn, recently published by Basic Books.
Multinational Monitor:How can labor deal with capital flight?
BENNETT HARRISON In the first place, some capital is more mobile than other capital. That is one of the reasons why organizing office workers, hospital workers, workers in the service industry that services the large multinational corporations, is such a crucial priority. In principle, many services are highly mobile also. But that is in principle. Moreover, foreign governments are actively subsidizing the development of their own service sectors. So it is not quite so easy for an American insurance company to bop over to Tokyo as it is for, let's say, GM to decide, 'We are going to stop fighting. We are just going to become an importer of Japanese and Korean automobiles and take part of the profit,' which is a serious possibility. That is not quite so easy for Prudential. So organizing in the less footloose, certain parts of the service sector, becomes a very high priority.

MM: What else?
HARRISON Legislation has to be national, indeed international. In Europe it is international. It is not totally effective, but at least there are European-wide regulations with respect to advance notification and industrial relocation that people can organize around. Regulations have been developed gradually over a 20-25 year period to have different governments honor the plant closing and relocation rules in other member states of the European community. There are proposals to create European wide restrictions that would require advance notification and compensation for the loss of a tax-base and so forth.

The Canadians have national legislation on plant closures that all of the individual Canadian provinces have to [adhere] to.... So obviously in the United States, we need national legislation. Not only on advance notice but, at least as importantly, requiring that those companies which not only don't go bankrupt in the process of closing plants but actually become richer be responsible for their actions. They are lopping off their less profitable operations and are becoming even more profitable in the process, and they should be responsible for replacing some of the lost tax-base. The UAW in Ohio and the Ohio Public Interest Campaign, and actually Walter Mondale when he was a Senator and then Vice President of the United States, started the movement for plant closure legislation in the 1970s. A very important cornerstone of what [they were] pushing ... was the demand that companies that close but continue to be profitable concerns should make a contribution to the treasury of the community which they are abandoning in lieu of the taxes which they would have continued to pay had they stayed. The idea is to create an economic development fund out of which could be financed replacement development, replacement investment. That part of the original demands seems to have gotten lost in the concern for advance notification. Advance notification is very important, but the replacement fund is also very important.

MM: Should that be attempted on the national level?
HARRISON The problem is, ultimately, a national problem .... But, if you go back and research the history of all progressive legislation in the United States, it all starts at the local level with local and then state laws. This state has this law, that state has this law, it gets to be chaos and finally, when one looks at the history of this, companies themselves actually send their lobbyists to Congress to say, 'This is crazy. We need standardization.' Unemployment insurance went that way, health insurance went that way, child labor laws, the 40-hour week, you name it. ... We almost had a plant closing law in Massachusetts several years ago, but the governor, Dukakis, chickened out. Most of the high-tech companies were screaming, 'We'll boycott Massachusetts if you pass a law like this.'

That was nonsense. That was a poker game and the governor blinked. The high-tech companies in Massachusetts are not about to leave Massachusetts, at least not in the short run and go to Vermont. There is too much at stake here [in terms of] skilled labor around the universities, in access to the airport and to access [to] downtown. All of this is a poker game. I am not suggesting that this is casual or that the odds aren't enormous or that people aren't going to lose. There are big stakes, but part of it at least is a matter of putting together the political coalitions to make some of this work. But the ultimate logic of it is that it is getting harder and harder without national legislation and, more importantly, national political commitment to make the case that it is crucial to resist the blatant playing off by companies of one political jurisdiction against another.

MM: Didn't most of the historical examples of states taking a lead in regulating industry or demanding that they bring up standards happen in the older age of capital before the mobility and also in a time when, politically, labor was on the rise?
HARRISON That's true, but it is also true that the steel companies made their move in the late 1970s, early 1980s, sluffing off some old plants, but also building some enormous new ones, and going to the mini-mills. There is a lot of capital attached to those. They have settled in Utah and in other places like that particularly. It is hard to imagine the state of Utah, of all places, passing a plant closing bill. But, if the muscle could be assembled to pass such legislation, it is not easy for them to fold up and simply move next door. First of all, next door is California, which is a pretty pro-labor state, even with a Republican governor. But you don't simply fold tremendously expensive facilities of that sort. In other words, labor and what is left of its political representation has more strength than they themselves realize.

There is a second side to this. The Third World itself is changing.... South Korea is industrializing and educating its young. South Koreans are demanding independent trade unions. They are not going to be as independent as some of the trade unions we have in the United States today, but they are going to be more independent than anything South Korea has ever had. Wages are rising in South Korea. Wages are rising in Brazil and Argentina and Taiwan. It is true that this means that capital to some extent can move on to Sri Lanka and to other places, but Sri Lanka or Bangladesh are not particularly desirable locations for high-technology, state-of-the-art metal working, or high-tech computer-driven textiles.

My point simply is that [even] without our actively constructing a global mobile movement, objective economic conditions that bring about relatively more common sets of experiences for labor are happening. They are happening because of industrialization. It brings into existence large pools of workers who share the experience of coming to work in a factory, facing the problem of having their wages and working conditions set by somebody else, the threat of being laid off, the threat of having their work closed because companies are going to move from Taiwan and South Korea to Malaysia and so forth. The threat and the fear of that energizes people. It gets people angry. They start to organize, they start to make demands on their governments. That is already happening.... There is a struggle in the United States, often seeming to be about protectionism, to require that foreign companies not be allowed to dump their products below cost in the United States threatening to put American workers out of work. That movement, which to the public seems to be a unified, solidified, reactionary demand for protectionism, is in fact a much more complicated political movement. It includes characters like [Rep. Richard] Gephardt [D-Mo.] who hoped to ride into the White House on a very know-nothing, mindless, racist, anti-foreign demand for protectionism. But inside of the United States, in fact, that movement is very fragmented and very complex. And there are elements within that movement that are [saying they] do not think Third World workers should have to starve in order that Americans keep their jobs. What we do want to say is that Third World governments that support their companies at our expense by impoverishing their workers and arresting union organizers [should] not be allowed free access to American markets....

MM: So you don't have just an economic standard, but a humanrights/labor standard?
HARRISON It is a human rights standard. In the long run, if that standard were exercised, one of its effects would be to strengthen the capacity of [political] and labor movements in those countries.... A lot of things in economics are complicated but this one really isn't. We have a very high standard of living in the United States and therefore high wages. The standard of living is still lower in most parts of the Third World and so wages are lower. There are only two things that can happen. Either our wages get bid down to theirs or their wages gradually get built up to ours.... [T]he only solution to the problem of capital flight is to create labor climates in more and more places in the Third World that make it more and more difficult for companies to run away because what they would be running to is a higher labor standard.

MM: When can we expect to start to see the economic effect of upward pressure on wages in the Third World?
HARRISON What we are seeing, if not the pressure of upward wages in the Third World, is growing political instability in the Third World. There is no question about that. And that is an element in all of this also. The indebtedness into which Third World countries have been forced by the policies of international lending agencies to a substantial extent dictated by the American Secretary of State and Secretary of Treasury and our institutions, those international policies which basically say to the Third World countries, 'you have got to continue to have a low-wage, export-oriented strategy because it is the only way you can pay your bills to our banks and to international banks,' that strategy is blowing up. And as that strategy blows up and falters, foreign locations are becoming increasingly risky places.

We are seeing this already. Companies talk about that among themselves.... American labor and its supporters must distinguish between rank protectionism and the kind of legislative demands that, for example, [Rev.] Jesse Jackson articulates, saying that we aren't interested in blocking imports from the Third World across the board. We are interested in [making] access to American markets contingent upon a policy which allows free labor organizing in the Third World.... The long run agenda is not to squash Chileans or Sri Lankans; it's to support their self-development in order to take away from international business the power to exploit living standard differentials. There are two ways to take their power away. One is to reduce the living standard differentials between peoples. The second is to take [these companies] over directly and talk about biting the bullet and speaking to the nationalization of industry. I don't think those are separate agendas....

MM: Don't most workers think about their own security and the fate of their company and not about the whole economy?
HARRISON ... A great many employee benefits, for example health insurance and pensions and social security, that American working people receive, including professionals, are tied to their employer. In most other civilized countries benefits are provided as rights of citizenship through the national government. Indeed, for all of the right-wing policies of the Thatcher government, it has made absolutely no headway whatsoever in undermining the principle in England that people, no matter where they work or whether they work or not, have a right to a variety of benefits. The Canadians have had maternity leave since the early 1970s as a right of citizenship and they are struggling now for paternity leave, paid, as a right of citizenship.

Historically in the United States many of these benefits were developed attached to companies. They are another example of how in America we do things in ways that force people to become especially attached to the economic fortunes of their companies. But we can change that. [It] didn't come from God, for crying out loud, [it] came from legislatures and Congresses and lawyers and lobbyists. Of course, what I am getting at is that the demand for national health insurance independent of where you work and for whom you work or whether you work and how long you work is a demand which is totally consistent with the long range demand for breaking this connection between individual working people and their indenture to the company with whom they work.... My point is that the demand for national health insurance, which might seem to have nothing to do with run-away shops and multinational corporations, is in fact a demand which is fully consistent with the long range objective of breaking the indenture of individual working people to individual companies and that connection is just as true for the vice president for long range corporate planning of General Motors or IBM as it is for the person who works on an assembly line in Ford or the secretary who works for the Massachusetts Institute of Technology.... The more we can break that connection between individuals and firms, the more we can undermine the power of individual companies to blackmail people by directly and indirectly saying to them, 'Your future depends on your allegiance to the company.'

MM: Can that work on the international level?
HARRISON Let me bite the political and ideological bullet rather than avoid it. There is no question that in the long run, the only protection that working people have from capital flight, which is what really we are talking about, the only protection we have from business using the ultimate blackmail of taking their money and running, is to create an alternative productive base that we control so that it can't run away. Call it socialism, call it nationalization, call it a progressive commonwealth, or whatever you like, but we've got to get from here to there.... The only way you get from here to there is to build the coalitions that become politically powerful enough to force [these changes]. The only way we build the coalitions that ultimately hold that leadership accountable is by building coalitions now around the kinds of issues and demands which are universally shared. The demand for national health insurance, adequate housing, the right to a job, and so forth, are demands that we can build with, we can bring more people into them. They are not sectarian, they are not narrow.

MM: What are the primary factors that corporations use in the site-selection process?
HARRISON There is a dominant theme which increasingly drives the location of industry. It is labor climate. Labor climate means the cost of labor is relatively inexpensive. But it also means labor organizations do not have significant power in the local legislature so that the company is not going to have to fight a pro-labor government. Labor climate means that organizers would not be treated well by the local police department. Labor climate means that the people in the area are especially younger professionals [who have] internalized this effort of allegiance to the company and have no class consciousness at all. Labor climate means all of those things and in the modern world we would argue companies are more concerned about labor climate than about anything else. And that means our job in combating the footlooseness of industry is to build positive labor climates. Positive from peoples' points of view.

MM: How can labor prevent companies from relocating when demands like you have spoken of are made on the companies?
HARRISON Once again we are coming full circle. Obviously if one community does it all by itself they are going to get hit over the head.... You only get change in one community by making demands that 88 percent of the community can subscribe to. You make a range of demands in order to be more inclusive, in order to redefine what you mean by 'working class demands.' ... We have to build more and more of those connections, coalitions, networks, so that the radical demands get taken more seriously. And then we take it from our town to the next town and from the next town to the next town. And if we build enough of that across towns and companies start saying they are going to boycott the United States and move somewhere else, then we build the connections somewhere else, as well. Then gradually, maybe we get something called social ownership of production. But I don't think we get to social ownership of production as a politically feasible demand before we get the daycare and the health insurance and the advance notification of plant closing and all of the rest of the pieces that people can relate to in their daily lives....